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Pearl River adds stocks and plans to acquire the largest piano manufacturer January 19, 2016, Pearl River Piano announced that it planned to acquire 90% share of Schimmel-Verwaltungs GmbH owned by Schimmel KG with 170mRMB (around 23.986m euro). It is known that Schimmel KG was found in 1885. It is a world famous …

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January 19, 2016, Pearl River Piano announced that it planned to acquire 90% share of Schimmel-Verwaltungs GmbH owned by Schimmel KG with 170mRMB (around 23.986m euro).

It is known that Schimmel KG was found in 1885. It is a world famous professional German piano manufacturer, as well as the largest piano producer in Germany. The company mainly engaged in piano production and sale, and owns the well-known Schimmel piano brand. By December 31, 2004, the consolidated totalassets of Schimmel-Verwaltungs GmbH was 11.228m euros, and the consolidated revenues in the year 2014 was 16.659m euros.

According to the statistics, Chinese market has shown a growing demand towards imported piano.

From 2007 (25,000) to 2014 (131,100), the demand increased to 5.2 times. This means that Chinese consumers are having higher requirements on piano, and no longer satisfy with the products produced by Chinese joint venture or sole proprietorship.

However, the majority of the imported pianos that rush into the Chinese market are secondhand pianos. In 2014, there were only 25,700 new pianos in 131,100 imported pianos in China. 97.5% percent of them were old pianos from Japan, Korea and Indonesia.

Therefore, oversea acquisition is imperative.

Also, on January 19, Pearl River Piano announced that it decided to add stocks of no more than
90,291,921, collecting capital of no more than 1.33bn RMB.

After this, Pearl River Piano will invest the capital in following parts: Guangzhou Culture Industry
Innovation Incubator Project, Zengcheng National Culture Industry Base Project (phaseII), National Culture, Art and Education Center Project, Pearl River Instrument Cloud Service Project, as well as supplement of additional liquidity.

This action aims to accelerate itscultural industrial layout, to finish the transition from a traditional manufacturer to a cultural servicecompany, and to perfectall aspects of the whole industrial chain.

In the first three quarter of 2015, Pearl River Piano has an income of around 1.107bn yuan,
dropping by 0.84% compared to the year before. At present, its annual sale is approximately 140,000 pianos and it takes up more than 36% of the domestic market. The growing speed of main business has slowed down and the company is seeking for a way of transformation.

In recent years, global piano market continues the weakness and high-end foreign brands enter China, which triggered fierce competition. Meanwhile, secondhand piano has a more serious impact on the market. The whole piano market isshowing a downturn trend.

However, culture industry is an area with growing space. During 2004-2014, domestic culture industry added value increased from 344bn yuan to 2.394 trillion yuan. The compound annual
growth rate reached 21%. Cultural industry has gradually grown into one of the pillar industries of the national economy.

Besides, government’s culture industrial policies provide a good opportunity for instrument industry to transform and develop. In 2007, the 17th CPC National Congress put forward the idea to encourage national cultural creativity and improve national soft power. Third Plenary Session of the 18th Central Committee of the CPC put forward the direction of deepen culture reform —-establishing and perfecting the market system, realizing market-oriented resource allocation. Those powerful supports from the nation towards culture industry provide good opportunity for Pearl River Piano to transform and develop.

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